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Amazon and Whole Foods are cutting prices again

Posted at 7:44 AM, Apr 02, 2019

Amazon is slashing prices on hundreds of products at Whole Foods for the third time in two years.

The cuts will go into effect Wednesday and are mostly focused on produce. Amazon and Whole Foods said customers will save an average of 20% off select items, including greens, tomatoes and fruits.

They'll also double the number of weekly deals for Prime members, and will give those people an additional 10% off "hundreds of sale items" throughout the store. Prime members in dozens of metro areas can also get free Whole Foods grocery delivery if they spend more than $35.

The Wall Street Journal first reported the plans.

Amazon bought Whole Foods two years ago for $13.7 billion, and has since tried to revamp the premium grocery brand's "Whole Paycheck" image. The company quickly cut prices on avocados, organic brown eggs, salmon and other items soon after the acquisition.

Despite those cuts, prices at Whole Foods have risen for three straight months, according to Morgan Stanley analyst Vincent Sinisi. In March, Sinisi found that Whole Foods' prices were 15% higher than rival grocers.

Meanwhile, Walmart, Costco and Kroger have all lowered their prices. That's putting pressure on Amazon to follow suit.

Amazon is also responding to the rapid expansion of German discount grocers Aldi and Lidl in the United States. Aldi has built hundreds of new stores in recent years and expanded its organic selection in a bid for wealthier shoppers.

"They've driven prices down, cleverly," Walmart US CEO Greg Foran said of Aldi last month at a conference.

Amazon does not break out Whole Foods' sales. But revenue at physical stores — which also include cashier-less Amazon Go stores, Amazon bookstores and Amazon 4-Star — fell 3% during Amazon's most recent quarter compared to a year ago. Amazon blamed an accounting change and a shift in the calendar for the decline.

Amazon reportedly plans to open dozens of its own grocery stores in major US cities, separate from Whole Foods. The stores will offer different, cheaper products than Whole Foods, including beauty and health items, the Journal reported last month.

Those stores could also help Amazon court shoppers beyond Whole Foods' wealthy customer base.